September 22, 2015

RETAIL RESEARCH

NTPC Limited

Tax Free Bond Issue Summary: NTPC Ltd, an Indian Central Public Sector Undertaking (CPSU), has come up with the public issue of tax free bonds for the face value of Rs 1,000 each in the nature of secured, redeemable non convertible debentures having tax benefits under section 10 (15) (iv) (h) of the Income tax Act, 1961, for an amount of Rs. 400 crore with an option to retain oversubscription of up to Rs. 300 crore for issuance of additional bonds aggregating to a total of up to Rs. 700 crore during fiscal 2016. In terms of the CBDT Notification, NTPC has been authorised to issue tax free secured redeemable non-convertible bonds for an amount of Rs 1,000 crore during the fiscal 2016 of which at least 70% of aggregate amount of bonds is to be raised through public issue. Accordingly, the Company has already issued tax-free secured redeemable nonconvertible bonds amounting to Rs. 300 crore being 30% of the Allocated Amount by way of private placement and now plans to raise the balance Rs. 700 crore (“Issue Size”) through this issue. The Company shall ensure that bonds issued pursuant to the CBDT Notification through public issue route and private placement route in fiscal 2016 shall, in aggregate, not exceed Rs. 1,000 crore. Government has permitted top seven state owned entities to sell tax free bonds (with different issue size) in the current financial year (FY 16) to raise corpus of Rs.40,000 crore. They are NHAI, IRFC, HUDCO, IREDA, PFC, REC and NTPC. In the earlier financial years, the state run companies (totally 13 state run entities) were allowed to issue these tax free bonds with the total amount allocated at Rs. 30,000 crore, Rs. 60,000 crore and Rs. 50,000 crore for the FY12, FY13 and FY14 respectively (Nil in FY 15). NTPC is the first out of the seven companies granted permission to come out with its public issue of tax-free bonds this fiscal year. The Bond Issue will open for subscription on September 23, 2015 and closes on September 30, 2015 (with an option for early closure or extension, as may be decided by the Board of NTPC). The issue consists of three series of Bonds – 10 years, 15 years and 20 years carrying interest rate (paying annually) @ 7.11%, 7.28% and 7.37% p.a. respectively. The Retail Individuals and HUF (applying for upto Rs.10 lakhs) would get an additional 25 bps in interest rate viz, 7.36%, 7.53% and 7.62% for the respective tenures. The issue has been rated by three rating agencies. ICRA Limited has assigned a rating of [ICRA] AAA (stable) while CRISIL Limited has assigned a rating of CRISIL AAA. CARE has assigned a rating of CARE AAA (Triple A) to the Bonds. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations and carry lowest credit risk. These ratings are not a recommendation to buy, sell or hold securities, and investors should take their own decision. These ratings are subject to revision or withdrawal at any time by the assigning rating agencies and should be evaluated independently of any other ratings. Tax benefits available on investing in these tax free bonds: 

The tax benefit available is on the interest income from these tax free bonds which is exempted from tax. But the investible amount in these bonds does not get any tax benefit.

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Interest from these Bonds do not form part of total income as per provisions of Section 10 (15) (iv) (h) of Income Tax Act, 1961 read along with Section 14A (1) of the Income Tax Act.

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There is no upper limit for any investors on investing in these bonds to get the tax free interest income. However, to retain 25bps in coupon rate, the investment by retail investors (this is applicable only for retail investors) should not exceed Rs. 10 lakh in the series of the bonds issued in the tranche. The same case is applicable while buying from secondary market also.

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Since the interest income on the Bonds is exempt, no tax deduction at source (“TDS”) is required. However interest on application money would be liable for TDS as well as would be subject to tax as per present tax laws.

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Wealth tax has been abolished w.e.f. financial year 2015-16 i.e. assessment year 2016-17.

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Capital Gain Taxes: Buying and Selling Tax Free Bonds in the secondary market attracts capital gain tax. If you sell these tax free bonds within 12 months from the date you have bought, then you will have to pay tax on the gains as per your tax slab. If you sell after 12 months, then tax has to be paid at flat rate of 10%. There is no indexation benefit available.

Availability of Tax free bonds in the secondary markets: The tax free bonds that were issued during FY 12, FY 13 and FY 14 (issued by the 13 PSU companies to the total of face value worth Rs. 1,40,000 crore) have been listed either on BSE or NSE or both. Out of 139 series of tax free bonds listed, close to 24 series of bonds are actively traded (at least 15 sessions out of 20 or 21 total sessions in a month). Investors may also consider this secondary markets option to buy though liquidity may be a challenge on some days. You may click the following link to access the details of actively traded tax free bonds in the secondary market. http://hdfcsec.com/Share-Market-Research/DebtReports/4/All

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The following table lists out the tax free bonds which are actively traded in the secondary markets BSE and NSE. Some of actively traded tax free bonds in the secondary markets (traded on atleast 15 out of 20 sessions in the last one month period ended 14th September 2015): Issuer

HUDCO HUDCO HUDCO IIFCL IRFC NHAI NHB REC NHAI NHAI PFC REC HUDCO NHB PFC IIFCL IRFC REC REC HUDCO IIFCL IRFC NTPC REC

Series

HSL ID

Credit Rating

Date of Allotment

Coupon Rate (%)

Residual Maturity

Coupon payment frequency

Interest paid on

Latest Record Date

HUDCO050327 876HUDCO28 - Indiv 901HUDCO34 - Indiv 891IIFCL34E - Indiv IRFC N2 820NHAI22 NHBTF2023 N6 - Indiv 871REC28 - Indiv 830NHAI27 NHAI - N6 - Indiv 820PFC2022 738REC27TF HUDCO050322 NHBTF2014 N6 - Indiv 892PFC33 - Indiv 880IIFCL29 - Indiv IRFC NE - Indiv 812REC27 722REC22TF 839HUDCO23 - Indiv 866IIFCL24C - Indiv IRFC N1 NTPC - N6 - Indiv 793REC22

HUD820N2NR HUD876B2NR HUD9013BNR IIF891NBNR IRF810N2NR NHA820N1NR NHB893N6NR REC871N9NR NHA830N2NR NHA875N6NR PFC820N5NR RECLTDN2NR HUD810N3NR NHB901N6NR PFC892B3NR IIF880B2NR IRF888NENR REC812NBNR RECLTDN1NR HUD839B1NR IIF866NCNR IRF800N1NR NTPLTDN6NR REC793NBNR

AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA

07-Mar-12 25-Oct-13 13-Jan-14 22-Jan-14 23-Feb-12 25-Jan-12 24-Mar-14 24-Sep-13 25-Jan-12 05-Feb-14 01-Feb-12 19-Dec-12 07-Mar-12 13-Jan-14 16-Nov-13 27-Mar-14 26-Mar-14 27-Mar-12 19-Dec-12 25-Oct-13 22-Jan-14 23-Feb-12 16-Dec-13 27-Mar-12

8.20% 8.76% 9.01% 8.91% 8.10% 8.20% 8.93% 8.71% 8.30% 8.75% 8.20% 7.38% 8.10% 9.01% 8.92% 8.80% 8.88% 8.12% 7.22% 8.39% 8.66% 8.00% 8.91% 7.93%

11.48 Years 13.12 Years 18.35 Years 18.37 Years 11.45 Years 6.37 Years 13.53 Years 13.04 Years 11.37 Years 13.41 Years 6.39 Years 12.27 Years 6.48 Years 18.35 Years 18.19 Years 13.54 Years 13.54 Years 11.54 Years 7.27 Years 8.12 Years 8.36 Years 6.45 Years 18.27 Years 6.54 Years

Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly Yearly

5 of March 25 of October 13 of January 22 of January 15 of October 1 of October 24 of March 1 of December 1 of October 15 of March 15 of October 1 of December 5 of March 13 of January 16 of November 27 of March 15 of April 1 of July 1 of December 25 of October 22 of January 15 of October 16 of December 1 of July

18-Feb-15 10-Oct-14 29-Dec-14 07-Jan-15 29-Sep-14 16-Sep-15 11-Mar-15 18-Nov-14 16-Sep-15 28-Feb-15 29-Sep-14 18-Nov-14 18-Feb-15 26-Dec-14 31-Oct-14 12-Mar-15 30-Mar-15 16-Jun-15 18-Nov-14 10-Oct-14 07-Jan-15 29-Sep-14 01-Dec-14 16-Jun-15

Last Trade Price (Rs) 1119.25 1189 1230 1201 1150 1149 5940 1191.99 1187.98 1178 1126.04 1068.66 1084.13 6185.05 1227 1147 1178 1088 1051 1131 1140 1126 1211.01 1054

YTM (%)

7.22% 7.42% 7.30% 7.45% 7.14% 6.79% 7.22% 7.22% 6.91% 7.18% 7.18% 7.26% 7.26% 7.26% 7.38% 7.53% 7.22% 7.18% 7.34% 7.45% 7.30% 6.98% 7.45% 7.18%

Traded days in one month 20 20 20 20 20 20 20 20 19 19 19 19 18 18 18 17 17 17 17 15 15 15 15 15

Daily Average Volume 2466 817 876 1545 941 6439 150 873 1076 1412 404 653 1106 114 1344 472 370 2637 231 264 256 578 523 298

* - Traded data as on Sep 14, 2015.

Please note, while buying bonds from secondary markets, investors should mainly look at the YTM, liquidity and credit rating. They should not take decision based on the coupon rate or the current market price - whether traded at premium or to discount to the face value. Objects of the Issue: The funds raised through this Issue will be utilized for incurring capital expenditure on the following renewable (solar) energy based power projects:  250 MW Solar Photovoltaic Power Project in Anantpur District, Andhra Pradesh,  Other renewable energy (including solar energy) based power projects (“Other Projects”), and  General corporate purposes (not exceeding 25% percent of the amount raised in this Issue). The total funding required to meet the engineering, procurement and construction costs, infrastructure costs, project management costs, interest during construction etc. (including recoupment of expenditure already incurred) for Anantpur Solar Project is estimated to be Rs. 1,779.24 crore. Anantpur Project has been appraised by an independent agency and has been found to be viable. Issue Terms: Issuer Issue

Issue Price and minimum application Stock Exchanges for listing Issuance Trading Trading Lot Call / Put options Rating Security

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NTPC Limited Public issue by NTPC Ltd of tax-free secured redeemable non-convertible Bonds of face value of Rs. 1,000 each in the nature of debentures having tax benefits under Section 10(15)(iv)(h) of the Income Tax Act, for an amount of Rs. 400 crore with an option to retain oversubscription of up to Rs. 300 crore for issuance of additional bonds aggregating to a total of up to Rs. 700 crore during fiscal 2016. Rs.1,000 & Rs.5,000 respectively BSE and NSE Both physical and dematerialized form Compulsorily in dematerialized form 1 (one) Bond Nil [ICRA] AAA (Stable) by ICRA, CRISIL AAA by CRISIL, CARE AAA (Triple A) by CARE The Bonds will be secured by a pari passu charge on specified moveable and/ or immovable assets of the Company as may be mentioned in the Bond Trust Deed. The Bonds will have asset cover of one time of the total outstanding amount of Bonds and interest thereon. The Company reserves the right to create further charge on such asset cover for its present and future financial requirements or otherwise, or as provided for under the Bond Trust Deed, provided that minimum asset cover of one time is maintained. The Company has obtained no-objection certificates wherever required from the existing debenture trustees/lenders prior to creation of asset cover of one time of the Bonds including interest thereon. The Bondholders are entitled to the benefit of the Bond Trust Deed and are bound by and are deemed to have notice of all provisions of the Bond Trust Deed.

Issue Details: For Category Investors For Category I, II & III For Category IV only Options Series 1A Series 2A Series 3A Series 1B Series 2B Series 3B Frequency of Interest Payment Annual Annual Annual Annual Annual Annual Tenor 10 years 15 years 20 years 10 years 15 years 20 years Coupon Rates (% p.a.) 7.11% 7.28% 7.37% 7.36% 7.53% 7.62% Annualized Yield (%) 7.11% 7.28% 7.37% 7.36% 7.53% 7.62% Redemption amount (Rs / bond) Repayment of the Face Value + interest Mode of payment Direct Credit, NECS, RTGS, NEFT and Cheques or Demand drafts Coupon Rate (%) p.a 7.11% 7.28% 7.37% 7.36% 7.53% 7.62% Effective pre-tax yield (per annum) for tax payers in 10.3% income tax bracket 7.93% 8.12% 8.22% 8.21% 8.39% 8.49% Effective pre-tax yield (per annum) for tax payers in 20.6% income tax bracket 8.95% 9.17% 9.28% 9.27% 9.48% 9.60% Effective pre-tax yield (per annum) for tax payers in 30.9% income tax bracket 10.29% 10.54% 10.67% 10.65% 10.90% 11.03% For HNIs, surcharge @12% of Income tax is applicable on taxable incomes above Rs.1 cr. In such a case the pre tax yield will be even higher. Note: 1.

The company will pay extra 25bps coupon rate for retailers - i.e. category IV investors (invest less than 10 lakh in these bonds). For eg, as seen in the above table, retail investors will get 7.36% for 10 year bond which is 25 bps higher than that of 7.11% for non retailers.

2.

If bonds allotted to retailers are transferred to non retailers, then the extra 25bps on interest rates will not be available: If the Bonds allotted against Series 1B, Series 2B and Series 3B are transferred by Retail Individual Investors to Non- Retail Individual Investors, being Category I, Category II and Category III investors, the coupon rate on such Bonds shall stand at par with coupon rate applicable on Series 1A, Series 2A and Series 3A respectively.

3.

If bonds allotted to retailers are transferred to retailers, then the extra 25bps on interest rates will be available: If the Bonds allotted against Series 1B, Series 2B and Series 3B are sold/transferred by the Retail Individual Investors to investor(s) who fall under the Retail Individual Investor category as on the Record Date for payment of interest, then the coupon rates on such Bonds shall remain unchanged.

4.

If any retailer holds the bonds for the face value amount of over Rs. 10 lakh, then he will lose out the 25bps extra benefit on the coupon rate: If on any Record Date, the original Retail Individual Investor Allotee(s)/transferee(s) hold the Bonds under Series 1A, Series 1B, Series 2A, Series 2B, Series 3A and Series 3B for an aggregate face value amount of over Rs. 10 lakh, then the coupon rate applicable to such Retail Individual Investor Allottee(s)/transferee(s) on Bonds under Series 1B, Series 2B, Series 3B shall stand at par with coupon rate applicable on Series 1A, Series 2A, and Series 3A, respectively. Please note that to retain the 25bps, the investment in the bonds by the retailers should not exceed the aggregate face value amount of Rs. 10 lakh either in a single series of the issue or the summation of the investment in the different series of the issue in same tranche.

5.

Verification on the basis of PAN: For the purpose of classification and verification of status of the eligibility of a Bondholder under the Retail Individual Investor category, the aggregate face value of Bonds held by the Bondholders in all the Series of Bonds Allotted under the Issue shall aggregated on the basis of PAN.

Taxation Explained: Tax Free: The Bonds are tax free in nature (exempt u/s 10(15)(iv)(h) of the Income Tax Act, 1961 and the interest on the Bonds will not form part of the total income. TDS: Since the interest Income on these bonds is exempt, no Tax Deduction at Source is required. Long Term Capital Gains: Under section 2 (29A) & 2 (42A) of the Income Tax Act, the Bonds are treated as a long term capital asset if the same is held for more than 12 Months where they are subject to the tax at 10% flat. Short Term Capital Gains: Short-term capital gains, where bonds are held for a period of not more than 12 months would be taxed at the investor’s tax bracket. STT: Securities Transaction Tax (STT) is not applicable on transactions in the Bonds. Gift Tax: As per section 56(2)(vii) of the I.T. Act, the gift shall be taxable as the income of the recipient where the aggregate fair market value of which exceeds Rs. 50,000. Wealth Tax: No wealth tax is levied. Cess: A 2% education cess and 1% secondary and higher education cess on the total income tax (including surcharge for corporate only) is payable by all categories of tax payers. Who can apply? Category I/QIBs:  PFIs as defined in Section 2(72) of the Companies Act 2013;  Alternative Investment Funds;  Scheduled commercial banks;  MFs registered with SEBI;  State industrial development corporations;  Insurance companies registered with the IRDA;  Provident funds with a minimum corpus of Rs. 25 crore;  Pension funds with a minimum corpus of Rs. 25 crore;

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 The National Investment Fund set up by resolution F. No. 2/3/2005-DD-II dated November 23, 2005 of the GoI, published in the Gazette of India;  Insurance funds set up and managed by the army, navy, or air force of the Union of India; and  Insurance funds set up and managed by the Department of Posts, India, subject to the above entities being authorized to invest in the Bonds. Category II/Corporates:  Companies falling within the meaning of Section 2(20) of the Companies Act 2013; and  Limited liability partnerships, statutory corporations, trusts, partnership firms in the name of their respective partners, associations of persons, co-operative banks, regional rural banks, societies registered under the applicable laws in India and other legal entities constituted and/or registered under applicable laws in India. that are authorized to invest in Bonds by their respective constitutional and/or charter documents, subject to compliance with respective applicable laws. Category III/HNIs: Investors falling under the following categories applying for an amount aggregating to more than Rs. 10 lakh across all Series of Bonds in the Issue:  Resident Individual Investors;  NRIs applying on a non-repatriation basis only; and  HUFs applying in the name of their respective kartas. Category IV/Retail Individual Investors: Investors falling under the following categories applying for an amount aggregating up to and including Rs. 10 lakh across all Series of Bonds in the Issue:  Resident Individual Investors;  NRIs applying on a non-repatriation basis only; and  HUFs applying in the name of their respective kartas. Who can not apply? The following persons and entities will not be eligible to participate in the Issue and any Applications from such persons and entities are liable to be rejected: 

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Minors not applying through their guardians. It is clarified that a guardian may apply on behalf of a minor, provided that such Applications indicate the names of both the minor, as well as the guardian. It is further clarified that it is the responsibility of the Applicant to ensure that the guardians are competent to contract under applicable statutory/regulatory requirements; Persons Resident Outside India and foreign nationals (including FIIs, Qualified Foreign Investors and NRIs applying on repatriation basis, but excluding NRIs applying on a non-repatriation basis only); Venture Capital Funds, as defined and registered with SEBI and Foreign Venture Capital Investors; Overseas Corporate Bodies; Persons ineligible to contract under applicable statutory/regulatory requirements;

FAQ Can Minor Invest in tax free bonds? Yes, in a guardian's name. Minors can invest in Tax free bonds provided the minor has a PAN Card & Demat account. Amount can be provided from the minors account only. The Guardian has to sign in the form. The form will have the details of the Minor & the guardian. The supporting documents are  

Guardian - Pan card, Address proof Minor - Pan card & Address Proof & Demat account statement

The required documents with physical form are Form duly signed / KYC Documents of the Minor & the Gaurdian / Cheque if the form is Non - ASBA / Cancelled Cheque. Can NRI apply on this issue? Yes. NRIs can invest in these issue on a non-repatriation basis. Applicants that are NRIs should note that only such Applications as are accompanied by payment in Rupees shall be considered for Allotment. An NRI can Apply for Bonds, subject to the conditions and restrictions stipulated under the Foreign Exchange Management (Borrowing or Lending in Rupees) Regulations, 2000, and other applicable statutory and/or regulatory requirements including the CBDT Notification. Allotment of Bonds to NRIs applying on a non-repatriation basis shall be subject to the following terms and conditions:  

Application Amounts shall be paid either through remittance from outside India through normal banking channels, or by transfer of funds held in the investor's Nonresident External (“NRE”)/Nonresident Ordinary (“NRO”)/Foreign Currency Non-resident (“FCNR”) account maintained with an authorized dealer in India; and No payments on the Bonds shall be repatriable outside India; and the maturity proceeds and interest on the Bonds shall be credited only to such specified bank account

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Basis of Allotment: Applicants belonging to all three Categories will be allocated as given in the table below: Particulars Portion Reservation for each Portion

Category I QIB 10% of the Overall Issue Size

Category II Corporate 25% of the Overall Issue Size

Category III HNI 25% of the Overall Issue Size

Category IV Retail 40% of the Overall Issue Size

Note: Applicants belonging to these categories will be allotted in the first instance on a first-come-first-serve basis determined on the basis of the date of upload of each Application in to the electronic system of the Stock Exchanges. In case of an oversubscription, allotments to the maximum extent possible, will be made on a first-come first-serve basis and thereafter on a proportionate basis in each Portion, determined based on the date of upload of each Application into the electronic system of the Stock Exchanges, meaning full Allotment of Bonds to the Applicants on a first-come-first-serve basis up to the date falling one day prior to the date of over-subscription and proportionate Allotment of Bonds to the Applicants on the date of oversubscription. Credit Rating: ICRA Limited (“ICRA”) has, by its letter (No. D/RAT/2015-16/N3/1) dated August 14, 2015, assigned a rating of [ICRA] AAA (stable) to the Bonds, and revalidated such rating by letter (No. D/RAT/2015-16/N3/5) dated September 1, 2015. CRISIL Limited (“CRISIL”) has, by its letter (No. NTPCLTD/137722/NCD/081500586) dated August 13, 2015, assigned a rating of CRISIL AAA to the Bonds, and revalidated such rating by letter (No. RG/NTPCL/SN/31714) dated September 1, 2015. Credit Analysis and Research Limited (“CARE”) has, by its letter (No. CARE/DRO/RL/2015-16/1606) dated September 1, 2015 assigned a rating of CARE AAA (Triple A) to the Bonds. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations and carry lowest credit risk. These ratings are not a recommendation to buy, sell or hold securities, and investors should take their own decision. These ratings are subject to revision or withdrawal at any time by the assigning rating agency(ies) and should be evaluated independently of any other ratings. Interest on application money: Interest on Application Amounts against which Bonds are Allotted to Applicants will be paid at the rate of 7.36% per annum, 7.53% per annum and 7.62% per annum on Series 1B, Series 2B and Series 3B, respectively, and at the rate of 7.11% per annum, 7.28% per annum and 7.37% per annum on Series 1A, Series 2A and Series 3A, respectively, subject to deduction of income tax under the Income Tax Act, from the date of realization of Application Amount through cheque(s)/demand draft(s) up to one day prior to the Deemed Date of Allotment. Interest on Refund: 5% per annum. Liquidity and Exit Options: The Bonds are proposed to be listed on the BSE and NSE. Company Background: NTPC was incorporated on November 7, 1975, under the name National Thermal Power Corporation Private Ltd. Subsequently, it was converted into a public limited company in September 1985. The company got its present name in October 2005. Government of India (GoI) holds majority stake in NTPC with a shareholding of 74.96% as on March 31, 2015. It is the largest power generation company in India with an installed generation capacity of 44,398 MW (including JVs) constituting 16.34% of the total installed power generation capacity in the country as on March 31, 2015. On a standalone basis, it had commercial capacity of 37,142 MW (as on March 31, 2015) through 24 power stations located across India representing 13.67% of the total installed capacity of India. The company’s contribution in the country’s total power generation stood at 23% during FY15 (refers to the period April 1 to March 31). The company added approximately 1,095 MW of capacity in FY15 on a standalone basis, which included Barh unit 2(660 MW), Koldam hydro (Unit I and II: 400 MW). The aggregate Plant Load Factor (PLF) for company’s the coal-based power plant declined marginally from 81.50% in FY14 to 80.23% in FY15. During FY15, on total operating income of Rs.75,239 crore, the company had reported PBILDT and PAT of Rs.17,899 crore and Rs.10,291 crore, respectively. Furthermore, as per the unaudited results of Q1FY16 (provisional) (refers to the period April 1 to June 30), NTPC has reported PBILDT and PAT of Rs. 3,438 crore and Rs.2,136 crore, respectively, on a total operating income of Rs.17,085 crore. (Source: CARE) NTPC has substantial expansion plans which are likely to be funded with a debt: equity ratio of 70:30 which may result in a higher gearing compared to the present debt equity ratio of 1.05 times (As on 31st March 2015). However, the company’s debt servicing ability is expected to remain strong, given the cost plus tariff structure and tariff competitiveness of its existing power plants. While a few of NTPC’s ongoing projects have seen some slippages in terms of project execution, this is unlikely to have a significant impact on the debt servicing capabilities given the strong cash flows from a large basket of operational power plants. (Source: ICRA) Competitive Strengths:  Leadership position in the Indian power sector  Robust financial position  Government support  Long-term agreements for coal and gas supply as well as for sale of electricity, providing cash flow visibility  Effective project implementation and risk management, including through investment in technology  Skilled human resources and employee development

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Commitment towards corporate social responsibility Strong corporate governance Customer focus

Strategy:  Focus on market leadership and opportunities for organic and inorganic growth  Pursue fuel security and diversify fuel mix  Adopt advanced technologies and focus on research and development Risks & Concerns:  The expansion and diversification plans are subject to a number of risks and uncertainties, which may result in an adverse effect on the business, financial condition and prospects.  Power projects generally have long gestation periods, and subject to various operational risks, which may result in an adverse effect on the business, financial condition and prospects.  The company has significant fuel requirements and may not be able to ensure availability of adequate fuel at competitive prices. Also, the company may not be able to ensure availability of sufficient amounts of coal of the grade, quality and specifications that the company require in order to operate the coal-based power stations, at commercially reasonable prices.  The power sector in India is highly regulated. For instance, tariff regulations issued by the Central Electricity Regulatory Commission (“CERC”), may adversely affect the business, financial condition and prospects. Moreover, other regulatory matters and changes in applicable law and policy may adversely affect the company.  The power purchase agreements (“PPAs”) may expose to certain risks that may affect the business, financial condition and prospects. Further, there is no assurance that the company will be able to sell power outside the long term PPAs and this could have an adverse impact on the revenues.  State utilities account for a significant portion of the sales of electricity generated from the directly owned power stations, and any change that adversely affects the ability to recover dues from them may adversely affect the financial position.  The company is involved in a number of legal proceedings that may be determined against the company. Further, opposition from local communities may adversely affect the business.  The company has incurred significant indebtedness and may incur substantial additional borrowings in connection with the business.  Failure to obtain or renew necessary regulatory approvals may adversely affect the business, financial condition and prospects.  The company is subject to various environmental, occupational, health and safety and other laws, which may subject to increased compliance costs that may have an adverse effect on the business, financial condition and prospects.  The business, financial condition and prospects may be adversely affected if the company is unable to take advantage of certain tax benefits or if there are adverse changes to the tax regime in the future.  This Prospectus includes certain unaudited standalone financial information, which has been subjected to limited review, in relation to the Company. Reliance on such information should, accordingly, be limited.  The Joint Statutory Auditors have included certain notes and matters of emphasis in their reports included in this Prospectus, which should be considered carefully by prospective investors in the Issue.  The company has significant contingent liabilities, which may result in an adverse effect on the business, financial condition and prospects, to the extent that any such liabilities materialize.  Inability to attract and retain, or appropriately replace, the key personnel and sufficient skilled workers may adversely affect the business, financial condition and prospects. Key financial parameters (Consolidated): (Rs In Crores) Parameters For non financial entities Net worth Total debt of which - Non current maturities of long term borrowing - Short term borrowing - Current maturities of long term borrowing Net fixed assets Non current assets Cash & bank balances (including cash & cash equivalents) Current investments Current assets Current liabilities Net Sales EBITDA EBIT Finance Costs PAT Dividend amounts Current ratio (Total current assets / Total current liabilities) Interest coverage ratio Gross debt / equity ratio Debt service coverage ratio

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2014-15

2013-14

82,093.98 1,02,252.00 93,362.92 640.15 8,248.93 1,59,407.09 1,77,784.53 14,251.61 1,887.39 41,791.62 35,946.33 79,943.97 17,512.28 11,947.67 3,570.37 9,986.34 2,061.38 1.16 5.54 1.25 2.27

87,329.72 81,454.98 75,542.30 433.64 5,479.04 1,38,032.32 1,55,659.74 17,050.67 1,636.96 44,385.39 29,665.11 78,478.70 19,698.70 14,928.71 3,203.07 11,403.61 4,791.76 1.5 7.09 0.93 2.68

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